The has been some interesting developments in the RIAA vs. Tenenbaum case that may have some far reaching consequences. How far reaching wasn’t clear until some paperwork surfaced with just how much the RIAA is losing in these file-sharing cases. We weigh the possibilities to figure out how likely the RIAA is going to appeal the judgment that the original fine was unconstitutional.

Note: This is an article I wrote that was published elsewhere first. It has been republished here for archival purposes

While there was some debate about how this new fine was still way too high, something interesting surfaced in the midst of all of this. An IRS form from the RIAA was discovered which said that the RIAA is spending over $17 million and only pulling in $391,000. It’s a trend that has been going for three years which, as Ray Beckerman suggests, shows that the RIAA spent a total of $64 Million and only $1,361,000 between 2006 and 2008.

It really shows a root cause for the RIAA being upset that a fine such as Tenenbaum was knocked down due to constitutional concerns. Not much is currently coming out of the RIAA at this point. The only thing that has recently come out of the organization was an anonymous comment from a high ranking official of the RIAA saying that an appeal is likely.

So, how likely is an appeal? The RIAA is currently losing tens of millions of dollars in its litigation campaign and not much is coming back. If the RIAA wins the original fine of $675,000, that’s a precedent that could ultimately see the money coming back to the RIAA gradually for future cases. So, it’s an investment to set some nasty precedents. If the new fine of $67,500 sticks, that’s a precedent that would be very worrying for the RIAA because the RIAA would completely log-jam the court system before they even get a chance to come close to recouping all of the legal costs over the years.

A business can talk about morals until they are blue in the face, but if it becomes nonviable thanks to locked in precedents to legally pursue file-sharers, there really is only two options the organization would eventually face – 1. Stop pursuing file-sharers or 2. Go bankrupt trying.

Looking at the options, the case is sort of a perfect storm for the RIAA too. They could back down and hope for a different case to have a better outcome, but how much better of a case could they hope for? They have a case where the defendant admitted guilt and the RIAA is getting a fine. Going back to square one is also risky because the questions of faulty evidence to name one example would, once again, haunt the RIAA throughout the case. So it’s all risk, no real award to back down and try again.

Another option the RIAA could take is to try to offer a settlement again, but it would not solve the core problem of the $2,250 per work fine precedent. It’ll simply defer the problem to a later time and mean they can’t get a precedent they want anywhere near as quickly – which, in and of itself is expensive.

Then there’s appealing the decision in the hopes of getting a much larger fine. There’s a possibility of it going up or down because the nature of file-sharing fines, at this point, is purely arbitrary. It’ll get really messy quick where to set the fine rate per work because the arguments could easily be reduced to, “Well, my imaginary losses are different from your imaginary losses!”, but at least the battle can shift either way.

Worst case scenario for the RIAA if they appeal is they lose every one. Should that happen, I’d argue that it threatens to derail the entire litigation campaign because the return of investment would be pretty bad. Either way, there’s a lot riding on getting a high fine including the ability to say to future alleged infringers, “You could be on the hook for millions! Pay up or else.”

Having said all of this, I’d argue that it would be a big surprise if the RIAA doesn’t appeal. So my prediction is that there’s a 95% chance the RIAA would appeal, a 4% chance that the RIAA would offer a settlement and a 1% chance the RIAA would drop the case. At least, that’s my prediction in all of this.